Based on the 2021 numbers:
401(k) elective deferrals are limited to 19,500. Limits here make sense as savings offer obvious advantages: pre-tax contributions in case of regular 401(k); non-taxed distributions in case of roth (401)k.
Additionally, individuals are allowed to setup after-tax contributions. As the name suggests, these contributions are made with after-tax dollars and earnings are taxed when distributed. This is no different than any investment account. The annual IRS limit for after-tax contributions is set at 58,000 in 2021. What is the point of that limit?
Why should I prefer after-tax contributions when I can open a zero-commission investment account and buy/sell the same Vanguard ETFs without limits, paying taxes on earnings?
